Question 1

Which of the following is most likely to be a fixed resource for Paul's Country Fresh Pies, Inc.?

Accepted Answer

A)  berries
B)  flour
C)  bakers
D)  eggs
E)  ovensF) D) and E)
G) A) and B)

Question 2

Diseconomies of scale are pictured on a graph by the upward-sloping portion of the

Accepted Answer

A)  marginal product curve
B)  short-run marginal cost curve
C)  long-run marginal cost curve
D)  short-run average cost curve
E)  long-run average cost curveF) C) and D)
G) A) and B)

Question 3

When marginal product is decreasing, marginal cost is

Accepted Answer

A)  less than zero
B)  equal to zero
C)  constant
D)  decreasing
E)  increasingF) None of the above
G) A) and B)

Question 4

Exhibit 7-14 Total Cost Curve  In Exhibit 7-14, what is the average cost when producing 10 units of output?

Accepted Answer

A)  $0
B)  $2.00
C)  $4.00
D)  $4.60
E)  cannot be determined from the total cost curveF) C) and D)
G) A) and E)

Question 5

If General Electric finds that when it doubles both its plant size and the amount of associated inputs, its output level does not double, then

Accepted Answer

A)  the law of diminishing returns is in effect
B)  long-run average costs must be decreasing
C)  the firm is experiencing diseconomies of scale
D)  the firm should increase production
E)  the firm is experiencing constant returns to scaleF) A) and B)
G) A) and C)

Question 6

Exhibit 7-5  In Exhibit 7-5, what are variable costs at 15 units of output?

Accepted Answer

A)  $30
B)  $10
C)  $1
D)  $20
E)  it is impossible to calculate variable cost unless we know the daily wageF) C) and D)
G) A) and E)

Question 7

Which of the following is a short-run adjustment?

Accepted Answer

A)  Toyota builds an automobile plant in Kentucky.
B)  Faced with increasing enrollment, a private college builds a new School of Business building.
C)  Because of staggering losses, three insurance companies exit the industry.
D)  People's Bank hires two new tellers to meet increased demand for customer services.
E)  Shaveco enters the razor blade market with a new product, produced in the United States.F) B) and E)
G) B) and D)

Question 8

Suppose Ernie gives up his job as financial advisor for P.E.T.S., at which he earned $30, 000 per year, to open up a store selling spot remover to Dalmatians.He invested $10, 000 in the store, which had been in savings earning 5 percent interest.This year's revenues in the new business were $50, 000, and explicit costs were $10, 000.Calculate Ernie's economic profit.

Accepted Answer

A)  $10, 000
B)  $50, 000
C)  $20, 000
D)  $40, 000
E)  $9, 500F) A) and B)
G) All of the above

Question 9

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his profit change?

Accepted Answer

A)  Implicit costs fall.
B)  Explicit costs remain unchanged while implicit costs rise.
C)  Economic profit must fall.
D)  Explicit costs rise.
E)  Accounting profit will rise.F) A) and D)
G) B) and E)

Question 10

The additional output obtained by adding another unit of labor to the production process is called

Accepted Answer

A)  the marginal cost of labor
B)  the average output of labor
C)  a variable cost
D)  the marginal product of labor
E)  the marginal utility of laborF) B) and D)
G) B) and C)

Question 11

If all my savings are invested in my consulting company, an increase in the interest rate increases my implicit costs.

Accepted Answer

A) True 
 B)False

Question 12

Zipco's accounting profit is equal to its

Accepted Answer

A)  total revenue minus opportunity costs
B)  total revenue plus opportunity costs
C)  total revenue minus imputed costs
D)  total revenue minus explicit costs
E)  total revenue minus explicit and implicit costsF) A) and E)
G) All of the above

Question 13

Which of the following is true of marginal product?

Accepted Answer

A)  The firm should produce where marginal product is greatest.
B)  The firm should produce where marginal product is increasing.
C)  When marginal product is falling, total product is falling.
D)  The firm should produce where marginal product is zero.
E)  When marginal product is increasing, total product is increasing by increasing amounts.F) A) and C)
G) A) and B)

Question 14

Exhibit 7-14 Total Cost Curve  In Exhibit 7-14, at what point does the firm begin to experience increasing marginal cost?

Accepted Answer

A)  after the 1st unit of output
B)  after the 3rd unit of output
C)  after the 5th unit of output
D)  after the 7th unit of output
E)  cannot be determined from the total cost curveF) A) and B)
G) All of the above

Question 15

Exhibit 7-11  Movement from point a to point b in Exhibit 7-11 indicates that the firm is experiencing

Accepted Answer

A)  economies of scale
B)  increasing average cost
C)  economies of cost
D)  a decrease in average plant size
E)  diseconomies of scaleF) D) and E)
G) A) and E)

Question 16

Two friends, Diane and Sam, own and run a bar.Diane tends bar on Monday, Wednesday, and Friday and receives a wage in addition to tips.Sam tends bar on Tuesday, Thursday, and Saturday and receives only tips.Which of the following represents an implicit cost of operating the bar?

Accepted Answer

A)  Diane's wage
B)  Sam's time
C)  Diane's tips
D)  Sam's tips
E)  both Diane's and Sam's tipsF) A) and D)
G) C) and D)

Question 17

Exhibit 7-8  In Exhibit 7-8, when output is 10,

Accepted Answer

A)  total cost equals $10
B)  fixed cost equals $1
C)  variable cost equals $10
D)  marginal cost equals $10
E)  fixed cost equals $10F) All of the above
G) B) and D)

Question 18

Zipco's economic profit is equal to its

Accepted Answer

A)  total revenue minus accounting profit
B)  total revenue minus explicit costs
C)  total revenue plus accounting profit
D)  total revenue plus opportunity costs
E)  accounting profit minus implicit costsF) C) and E)
G) All of the above

Question 19

Empirical studies of production suggest that the long-run average cost curve

Accepted Answer

A)  is U-shaped
B)  has an inverted L shape
C)  is L-shaped
D)  is horizontal
E)  shows diminishing marginal returnsF) B) and D)
G) None of the above

Question 20

Total fixed cost divided by the level of output yields

Accepted Answer

A)  average variable cost per unit
B)  average fixed costs per unit
C)  marginal cost per unit
D)  average total cost per unit
E)  marginal productivity per unit of fixed resourceF) A) and C)
G) B) and D)

Exam 7: Production and Cost in the Firm

Exhibit 7-8 In Exhibit 7-8, when output is 10,

Correct Answer
verified

Exhibit 7-5 In Exhibit 7-5, what are variable costs at 15 units of output?

Correct Answer
verified

Zipco's economic profit is equal to its

Correct Answer
verified

Diseconomies of scale are pictured on a graph by the upward-sloping portion of the

Correct Answer
verified

If all my savings are invested in my consulting company, an increase in the interest rate increases my implicit costs.

Correct Answer
verified

When marginal product is decreasing, marginal cost is

Correct Answer
verified

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what is the average cost when producing 10 units of output?

Correct Answer
verified

Total fixed cost divided by the level of output yields

Correct Answer
verified

Zipco's accounting profit is equal to its

Correct Answer
verified

Which of the following is a short-run adjustment?

Correct Answer
verified

The additional output obtained by adding another unit of labor to the production process is called

Correct Answer
verified

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, at what point does the firm begin to experience increasing marginal cost?

Correct Answer
verified

Empirical studies of production suggest that the long-run average cost curve

Correct Answer
verified

Exhibit 7-11 Movement from point a to point b in Exhibit 7-11 indicates that the firm is experiencing

Correct Answer
verified

Which of the following is true of marginal product?

Correct Answer
verified

If General Electric finds that when it doubles both its plant size and the amount of associated inputs, its output level does not double, then

Correct Answer
verified

Correct Answer
verified

Which of the following is most likely to be a fixed resource for Paul's Country Fresh Pies, Inc.?

Correct Answer
verified

Two friends, Diane and Sam, own and run a bar.Diane tends bar on Monday, Wednesday, and Friday and receives a wage in addition to tips.Sam tends bar on Tuesday, Thursday, and Saturday and receives only tips.Which of the following represents an implicit cost of operating the bar?

Correct Answer
verified

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his profit change?

Correct Answer
verified

Exam 7: Production and Cost in the Firm

Exhibit 7-8 In Exhibit 7-8, when output is 10,

Correct AnswerverifiedShow Answer

Exhibit 7-5 In Exhibit 7-5, what are variable costs at 15 units of output?

Correct AnswerverifiedShow Answer

Zipco's economic profit is equal to its

Correct AnswerverifiedShow Answer

Diseconomies of scale are pictured on a graph by the upward-sloping portion of the

Correct AnswerverifiedShow Answer

If all my savings are invested in my consulting company, an increase in the interest rate increases my implicit costs.

Correct AnswerverifiedShow Answer

When marginal product is decreasing, marginal cost is

Correct AnswerverifiedShow Answer

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, what is the average cost when producing 10 units of output?

Correct AnswerverifiedShow Answer

Total fixed cost divided by the level of output yields

Correct AnswerverifiedShow Answer

Zipco's accounting profit is equal to its

Correct AnswerverifiedShow Answer

Which of the following is a short-run adjustment?

Correct AnswerverifiedShow Answer

The additional output obtained by adding another unit of labor to the production process is called

Correct AnswerverifiedShow Answer

Exhibit 7-14 Total Cost Curve In Exhibit 7-14, at what point does the firm begin to experience increasing marginal cost?

Correct AnswerverifiedShow Answer

Empirical studies of production suggest that the long-run average cost curve

Correct AnswerverifiedShow Answer

Exhibit 7-11 Movement from point a to point b in Exhibit 7-11 indicates that the firm is experiencing

Correct AnswerverifiedShow Answer

Which of the following is true of marginal product?

Correct AnswerverifiedShow Answer

If General Electric finds that when it doubles both its plant size and the amount of associated inputs, its output level does not double, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is most likely to be a fixed resource for Paul's Country Fresh Pies, Inc.?

Correct AnswerverifiedShow Answer

Two friends, Diane and Sam, own and run a bar.Diane tends bar on Monday, Wednesday, and Friday and receives a wage in addition to tips.Sam tends bar on Tuesday, Thursday, and Saturday and receives only tips.Which of the following represents an implicit cost of operating the bar?

Correct AnswerverifiedShow Answer

John moved his office from a building he was renting downtown to the carriage house he owns in back of his house.How will his profit change?

Correct AnswerverifiedShow Answer

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